Chapter 3 - Pearson Learning Solutions

96 PART 2 • THE GLOBAL MARKETING ENVIRONMENTThe enlargement of the EU will further impact marketing strategies. For example, food safetylaws in the EU are different from those in some Central European countries. As a result, Coca-Cola had to delay launching its Powerade sports drink and other beverage products. Specifically,Polish and EU food law require the use of different ingredients. In addition to the harmonizationof laws, the very size of the expanded EU offers opportunities. For example, Procter & Gambleexecutives foresee that, in the event of shortages in a particular country, they will be able to shiftproducts from one market to another. A 27-nation EU also allows for more flexibility in the placementof factories. There will also be challenges. For example, South American banana growersnow face 75 percent tariffs on exports to the new EU countries; previously, tariffs on bananas werevirtually nonexistent. Also, because tariffs and quotas protect sugar production in the EU, bothconsumers and food producers such as Kraft will face rising costs. 18Because they are in transition, the markets of Central and Eastern Europe present interestingopportunities and challenges. Global companies view the region as an important new source ofgrowth, and the first company to penetrate a country market often emerges as the industry leader.Exporting has been favored as a market entry mode, but direct investment in the region is on therise; with wage rates much lower than those in Spain, Portugal, and Greece, the region offersattractive locations for low-cost manufacturing. For consumer products, distribution is a criticalmarketing mix element because availability is the key to sales.One study examined the approaches utilized by 3M International, McDonald’s, PhilipsElectronics, Henkel, Südzucker AG, and several other companies operating in Central Europe.Consumers and businesses in the region are eagerly embracing well-known global brands that wereonce available only to government elites and others in privileged positions. The study found a highdegree of standardization of marketing program elements; in particular, the core product and brandelements were largely unchanged from those used in Western Europe. Consumer companies generallytarget high-end segments of the market and focus on brand image and product quality; industrialmarketers concentrate on opportunities to do business with the largest firms in a given country. 19THE MIDDLE EASTThe Middle East includes 16 countries: Afghanistan, Bahrain, Cyprus, Egypt, Iran, Iraq, Israel,Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, Syria, the United Arab Emirates (whichinclude Abu Dhabi and Dubai), and Yemen (see Exhibit 3-5). The majority of the population isArab, a large percentage is Persian, and a small percentage is Jewish. Persians and most Arabsshare the same religion, beliefs, and Islamic traditions, making the population 95 percent Muslimand 5 percent Christian and Jewish.Despite this apparent homogeneity, many differences exist. Middle Eastern countries are distributedacross the index of economic freedom discussed in Chapter 2; Bahrain ranks the highest interms of freedom, at 16. Kuwait, Saudi Arabia, and the United Arab Emirates are clustered in themid-50s. Moreover, the Middle East does not have a single societal type with a typical belief,behavior, and tradition. Each capital and major city in the Middle East has a variety of social groupsthat can be differentiated on the basis of religion, social class, education, and degree of wealth.The price of oil drives business in the Middle East. Seven of the countries have high oilrevenues: Bahrain, Iraq, Iran, Kuwait, Oman, Qatar, and Saudi Arabia hold significant world oilreserves. Oil revenues have widened the gap between poor and rich nations in the Middle East,and the disparities contribute to political and social instability in the area. Saudi Arabia, a monarchywith 22 million people and 25 percent of the world’s known oil reserves, remains the mostimportant market in this region.In the past, pan-Arabism, a form of nationalism and loyalty that transcends borders andamounts to anti-Western dogma, characterized the region. During the Persian Gulf War in theearly 1990s, this pan-Arabism weakened somewhat. To defeat Iraq, the Gulf Arabs and theirallies broke many of their unwritten rules, including the acceptance of help from the UnitedStates, a traditional ally of Israel. However, anti-Americanism was ignited in 2003 following18 Scott Miller, “Trading Partners Meet New EU,” The Wall Street Journal (May 4, 2004), p. A17.19 Arnold Shuh, “Global Standardization as a Success Formula for Marketing in Central Eastern Europe,” Journal ofWorld Business 35, no. 2 (Summer 2000), pp. 133–148.000200010270740623Global Marketing, Sixth Edition, by Warren J. Keegan and Mark C. Green. Copyright © 2011 by Warren J. Keegan. Published by Prentice Hall.